In Refined Metals Corporation v. NL Industries Inc., 937 F.3d 928 (7th Cir. 2019) the U.S. Court of Appeals for the Seventh Circuit affirmed a lower court dismissal of a contribution action brought by a Potentially Responsible Party (PRP) 19 years after it had executed a settlement with federal and state environmental agencies. The court joined several other circuits in holding that a settlement resolving Resource Conservation and Recovery Act (RCRA) claims triggers the three-year statute of limitations for Comprehensive Environmental Response Compensation and Liability Act (CERCLA) contribution actions.
Refined Metals purchased a lead smelter operation from NL Industries Inc. (NL) in 1980. The site proved to be contaminated and, in response to federal and state enforcement actions, Refined Metals entered into a judicial consent order with the U.S. Environmental Protection Agency (EPA) and the Indiana Department of Environmental Management (IDEM) in 1998. The consent order resolved claims under RCRA and the Clean Air Act and required Refined Metals to pay a fine and remediate the site. In 2017, after it completed the remedy, Refined Metals brought actions under CERCLA sections 107 and 113 against NL. The lower court granted NL’s motion to dismiss, ruling that an action to recover the costs incurred in corrective action pursuant to the RCRA settlement was by definition a CERCLA contribution action under section 113(f)(3)(B) and, therefore, controlled by the three-year statute of limitations in section 113(g)(3).
The Seventh Circuit affirmed the dismissal, holding that the RCRA settlement sufficiently addressed cleanup liability to start the CERCLA clock running. The court ruled that even though the decree did not address CERCLA liability, it still met the requirements of section 113(f)(3)(B) in that it resolved a defendant’s “liability to the United States or a State for some or all of a response action or for some or all of the costs of such action.” The court stated that this reflected congressional intent that parties which reach “even a partial settlement with respect to a contaminated site” act quickly to seek compensation and complete the cleanup. To rule otherwise, the court said, would allow the plaintiff to set its own statute of limitations and, as in this case, wait 19 years before filing an action.
The Seventh Circuit also rejected Refined Metals’ attempt to use its nonadmission of liability in the decree as an indication that the decree had not resolved its liability. This echoed one of two factors expressly relied on by the court in Bernstein v. Bankert, 733 F.3d 190 (7th Cir. 2013), but which the court implicitly rejected in NCR Corp. V. George A. Whiting Paper Co., 768 F.3d (7th Cir. 2014). The court determined that a standard nonadmission of liability does not diminish the impact of a settlement that imposes duties on a respondent and limits the ability of the government to bring further actions. The court further held that it was immaterial that EPA’s reservation of rights in its RCRA settlement did not to address CERCLA liability to a determination that Refined Metals resolved some of its liability in the decree.
The Seventh Circuit’s decision is generally consistent with decisions by the U.S. Courts of Appeal for the Third and Ninth Circuits. While there is a contrary decision by the U.S. Court of Appeal for the Second Circuit, language in later rulings suggest that that court may be prepared to change its mind.
Refined Metals provides a cogent warning. EPA and states may be highly compartmentalized among various remediation programs, but the practitioner cannot afford that same mindset. Resolving liability for contamination under any federal or state statute may start the three-year clock for bringing contribution actions. Even if engaged in corrective action or other site actions required by a settlement, the practitioner needs to start evaluating their CERCLA case and looking for PRPs. While there are clearly downsides to suing at an early stage of a cleanup (e.g., not knowing the final number, needing to involve other parties in remedial discussions), actions can be taken short of litigation such as providing tolling agreements. The key issue is to be cognizant of the deadline and to know it will be here sooner than one thinks.